Our favorite neighborhood in all of Cusco [1] is San Blas [2], the bohemian district above the Plaza de Armas [3] that is crisscrossed with narrow alleys and teeming with cozy hostels, artisan galleries, and some of Cusco’s best bars. San Blas has a relaxing, artsy vibe, and its narrow streets keep out the traffic and smog of central Cusco.
Traffic has made parts of Cusco unpleasant. These areas include the extension of Plateros and Avenida El Sol, where even the back rooms of hotels hum with the noise of taxis and amplified advertisements.
Outside of San Blas, Cusco’s nicest lodging is along out-of-the-way streets like Suecia, Choquechaca, or Siete Cuartones/Nueva Alta, where classy bed-and-breakfasts are lined up along charming cobblestone streets.
Always make a reservation ahead of time in Cusco, and ask for the kind of room you want (e.g., with a view or double bed). Despite a steady increase in Cusco hotels, the best ones are increasingly booked solid May– November.
If you arrive and don’t like your room, you can usually wriggle out of your reservation after your first night and head elsewhere—there are lots of good options, especially among the newer, lesser-known hostels. It is best not to judge a hotel, especially the more economic accommodations, by the bedding, bathroom tiles, and decor in general.
Links:
[1] http://www.moon.com/destinations/peru/cusco
[2] http://www.moon.com/destinations/peru/cusco/sights/northeast-the-plaza-de-armas/san-blas
[3] http://www.moon.com/destinations/peru/cusco/sights/plaza-de-armas